STRIBLING: THE STATE OF THE MARKET November 5th, 2012 Elizabeth F. Stribling is the President of Stribling & Associates. Mover and Shaker Elizabeth Ann Stribling-Kivlan is the Executive Vice President, Director of Marketing & Business Development at Stribling. Here is a conversation between Elizabeth and Elizabeth Ann in the aftermath of Hurricane Sandy.
Elizabeth Ann on left: As a resident of Brooklyn Heights, with a penthouse directly on the water, Hurricane Sandy must have been extremely frightening.
Elizabeth on right: Personally, we were very fortunate. Our double-pane windows withstood the gale-force winds and even as the trees on our terrace swayed wildly in the fierce and howling wind they remained sturdy and upright. However, our building was completely inundated by an unprecedented 12-foot high surge of water that flooded our basement. This resulted in a fire which was quickly extinguished by New York's Bravest firefighters. For days we have had no water, heat or elevator service. The building staff has been fantastic as they work around the clock. Although we finally took refuge on the Upper East Side, I still love Brooklyn and my new life in this vibrant borough. My heart goes out to all those in the devastated areas of Queens, the Rockaways, Staten Island and New Jersey.
As a resident of Chelsea, I was without power for five days. Our Stribling office in TriBeCa also lost power, which resulted in the Stribling communication system going down. Public real estate data portals saved the day as did our dedicated IT staff who worked tirelessly until the ConEd power was finally restored on Saturday morning. Team spirit prevailed.
Clearly, we experienced a tale of two cities. Uptown Manhattan was almost completely spared while downtown was devastated. As my husband and I watched on that fateful evening, downtown went dark. The lights of uptown were reflected by low lying clouds to create a spectral downtown skyline of charcoal grey buildings silhouetted against the pale sky of the hurricane. It was a surrealistic vision of dead-dark buildings which was almost apocalyptic. When the last remaining lights of the Freedom Tower went out, along with the Miss Liberty torch, downtown temporarily ceased to exist.
Given recent reports showing that the population of Lower Manhattan has recently surged, this increase in the residential population of Lower Manhattan must have had a proportionally higher negative impact on the city's residents during the aftermath of the hurricane.
This was exactly the case. After 9/11, due to both tax incentives, subsidies and transit improvement, Lower Manhattan has blossomed into a destination area. In the last ten years the Census Bureau has recently reported that within a two-mile area around City Hall the population has grown by 40,000 people. Foreigners especially have been drawn to the iconic area of Wall Street, the Stock Exchange and the new World Trade Center.
I also understand that Brooklyn, Staten Island and communities such as Hoboken, New Jersey, have also grown dramatically as young professionals prefer a shorter commute to their work in a revitalized Lower Manhattan rather than life in the more traditional suburbs.
Absolutely. Unfortunately these areas are among the popular commuter communities that suffered the most dire consequences of Hurricane Sandy. In addition, the residential areas of Lower Manhattan, today occasionally called LoMa, have been a steady magnet over the last several decades. In the beginning, artists led the move to "Artist in Residence" loft conversions in TriBeCa and SoHo in the 1970's. I remember friends who were early pioneers who operated the freight elevators themselves. In those days, there weren't any of the hedge fund guys and gals or the celebrities that call these zip codes their homes today. Battery Park City, a complete residential enclave unto itself that was created in the late 70's, which represents a more affordable downtown area, was completely battered by wind and water. The increasing popularity of these downtown communities, as well as the nearby boroughs of Brooklyn and Staten Island, caused massive evacuations, complete turmoil and distress to our citizens.
What's it been like for you to temporarily return to the Upper East Side?
My husband and I have been so fortunate to benefit from the warm hospitality of friends. I grew up on the Upper East Side and lived there happily until I moved to Brooklyn three years ago. The Upper East Side remains a beautiful neighborhood of quiet streets and classic, mainly co-op buildings. I was both amused and reassured to hear one of our Stribling brokers say that although the Upper East Side may not be the Big Apple's trendiest neighborhood, it was mercifully dry and safe during this catastrophic time for the city.
You mentioned co-ops as the primary residential ownership on the Upper East Side. Is this the reverse from Lower Manhattan?
Basically, yes. Although the Upper East and West Sides are mainly composed of co-op buildings it must be noted that all new development ground-up residential buildings, or the more recent conversion of prewar rental buildings, will be offered as condominiums. Today, 75% of apartment ownership in New York City is co-op and 25% is condo. Every decade since the mid-80's has seen a 5% increase in the percentage of condominium ownership. In this current crisis period, I am very lucky to have the use of a three-room Park Avenue co-op apartment with a classic huge master bedroom with high ceilings and moldings. My hostess, who is a friend of 35 years and also a real estate broker, told me that she has often informed customers over the years that--even if they do not especially want a Park Avenue address--that is exactly where one can find the most classic and generous apartment layouts. Central Park West residents might argue the location, but the point is well taken. Classic prewar co-ops are grand in the best sense of the word.
Is there a difference in the cost of a co-op versus a condo?
Cooperatives are less expensive than condominiums, as condos offer more flexibility concerning financing, ownership (a corporate name or a trust is permitted) and use. You can purchase a condo and rent it, or use it on a personal work-at-home basis. As a result, condos can often cost as much as 40% more than a co-op. For the third quarter of 2012, the appraisal firm of Miller Samuel stated that the average cost of a Manhattan condo was $1.766 million versus $1.216 million for a co-op. However, an average condo versus an average co-op is not always an apple to an apple. Brokers usually give a guesstimate of 15% to 20% higher for a condo than a co-op; it is difficult to equate the services in these buildings. However, two things are certain. Condos cost more than co-ops, and the process of buying into a condo is becoming more and more similar to that of a co-op. Applicants for many re-sale condominiums must submit much of the same information that co-ops require (net worth, liquid assets and annual income with back-up information). However, a condominium board cannot reject potential buyers but must instead exercise a right of first refusal to purchase the unit on the same terms. Meanwhile, co-ops have become more and more demanding and 2012 witnessed an enormous rise in the percentage of board rejections.
Wasn't it true that the onerous admission requirements of co-ops added stability to the New York marketplace during the subprime meltdown following 2008?
That is correct. However, the New York residential housing market has seen very few foreclosures not only due to the tough co-op admissions process but also due to the requirement that first-time condo purchasers must put down a minimum of 10% to 20% cash on contract signing, thus assuring a very healthy cash investment in the more expensive condo form of housing.
Have condo apartments become the trophy apartments of today?
For the international money-is-no-object buyer, recent condo sales have been eye-popping. In early 2012, a much publicized $88 million penthouse condo sale at 15 Central Park West was soon followed by contracts signed on two duplexes, each at more than $90 million, at One57--the condo building dubbed "the Billionaires Club," now equally famous for the hurricane-induced dangling crane on its construction site across from Carnegie Hall--to the sale of a $70 million duplex condo penthouse atop the Ritz Carlton on Central Park South. These record-shattering sales in glossy condominiums are all proof of glittering "jewel in the crown" condo purchases.
With the recent havoc wreaked on our city due to Hurricane Sandy, do you think the appetite for sky-high condo living will diminish?
It's hard to say. Clearly, walking down 30 to 50 stories of stairs in the wake of the hurricane has been daunting to Gotham residents. However, the building and construction sites held steady throughout the city. Up to the arrival of the hurricane, sky high was the latest trend. As the city recovers, memory may be short.
What will the new skyline look like? How high is high?
The present winner on residential sheer height that is currently inhabited is the 76-story rental building in the Financial District at 8 Spruce Street, called New York by Gehry, at 870 feet high: studios start at $2,575, one-bedrooms at $3,575, two-bedrooms at $6,000 and three bedrooms at $12,000. Rentals on the penthouses are asking $45,000 and $60,000 a month. Rising even higher is One57, at 157 West 57th Street, at 1,000 feet tall, designed by Christian de Portzamparc. I attended the pre-hurricane topping out party and the views were so breathtaking that the apartments amazingly seemed to warrant the average price of around $6,000 per square foot. Still to rise on the horizon is the almost 1,400-foot high aluminum and glass tower under construction at 432 Park Avenue on the site of the former Drake Hotel, at 56th Street and Park Avenue, designed by Rafael Viñoly Architects. Current pricing averages $5,941 per square foot, but prices could rise by the time of completion--which is projected for 2015, when it will be the highest building in New York City with residential occupancy. Lower Manhattan will witness the conversion of the Woolworth Building, one of the city's first iconic skyscrapers. This neo-Gothic architectural landmark may not be as tall as other newly constructed condo towers but it looms large as an emblematic city legend.
Back to ground earth, what is the state of the overall New York City residential market?
It's all about inventory. The current inventory of residential listings, which is hovering somewhere around 6,000 apartments, is the lowest since the mid-2000's. The average price of a Manhattan property in the third quarter of 2012 is around $1.4 million, which has not changed significantly from the previous year's quarter. However, if the average sales price has not changed radically, the volume of sales in the last quarter rose substantially from the previous quarter according to all reports. This is especially meaningful for it indicates that demand is much stronger than supply. Even with an extremely low inventory, the demand continues to outstrip a limited supply.
Does this mean that prices will rise?
This is difficult to predict. The voracious appetite of parents buying apartments for their college-age youngsters has fueled the volume of sales of studio and entry level one-bedroom apartments. With interest rates at record lows, it is a far better investment for this segment of the market to buy rather than rent apartments for their offspring. At the same time, potential buyers for large apartments with three to five bedrooms are thwarted by the lack of inventory. As a result, bidding wars for properly priced apartments are on the increase again. This demand for inventory has equally fueled the rage for new condominium offerings. New development condos are being gobbled up as frantic buyers try to secure just-released units. According to Crain's New York, by the last quarter of 2012, a mere 27 new condos, co-ops or conversions in Manhattan, with a total of 875 units, had been filed with the Attorney General's office--as compared with 52 similar plans in 2011, and 211 plans at the peak of the market in 2006. Even though new developments will be limited, foreign investors continue to see New York City as a safe haven for investment. This has occasioned a surge in foreign purchases of condos, which today represent over 30% of total residential condo sales. This additional segment of eager buyers will continue to buoy the residential market. Normally, all of this should result in higher sales prices but worry over global economic uncertainties as well as national and international unemployment continues to temper all markets.
As we strive to return to normalcy in our city and as our damaged buildings, infrastructure and power systems are valiantly being restored to order, I would like to share some news with you about the progress of our own expansion and re-building at Stribling.
That's just great, as over the years I have noted that steady attention to work at hand focuses us on the optimism and inspiration of the American work ethic and its restorative power.
We are on target for the 2013 opening of our new Brooklyn office at 384-386 Atlantic Avenue, between Hoyt and Bond Streets, at the epicenter of the meeting point of Brooklyn Heights, Cobble Hill, Downtown Brooklyn and Fort Greene.
It has been my dream to be a brokerage for all of Brooklyn rather than merely a stand-alone neighborhood office for one single area such as Brooklyn Heights or Park Slope. Quality brokerage transcends neighborhoods and with the overall popularity of Brooklyn our customers should be entitled to a full range of neighborhood choices at Stribling Brooklyn.
Our location on Atlantic Avenue in the midst of a series of beautiful clothing boutiques, design shops, such as Jonathan Adler, and both funky and classic antique shops should make our Stribling brokerage part of a destination shopping experience.
Congratulations to you for spearheading this new expansion. Recently, I toured the new Barclays Center just blocks away and the arena is amazing. Also, I love the open two-way boulevard feeling of Atlantic Avenue.
Back in Manhattan, we are converting our Chelsea townhouse at 340 West 23rd Street into a brokerage with an airy art gallery ambiance as befits our Chelsea neighborhood. Uptown at 924 Madison, we have just completed a top floor penthouse expansion to accommodate additional agents. Our TriBeCa office at 32 Avenue of the Americas will continue to be the headquarters of our development marketing company, Stribling Marketing Associates, as well as our TriBeCa, SoHo and Lower Manhattan resale brokerage.
I wish you all good luck, Elizabeth Ann, as you help me lead Stribling forward into the future. At the same time, I know all of us at Stribling applaud the citizens of New York for their personal courage in their dedication to the rebuilding of our great city after the recent devastation of Hurricane Sandy. New York grew and prospered after the horrific events of 9/11. The resurgence and popularity of Lower Manhattan is a living testament to this triumph. Once again, we will more than rise to the present challenges that our city faces and prove to the world that New York remains indomitable against any forces of destruction.
Key Facts
6,000
Current inventory of Manhattan residential listings is the lowest since the mid-2000's.
$1.4 million
Average price of an apartment in Manhattan in the third quarter of 2012.
Apartment Ownership by type of residence in New York City
Cooperatives 25%
Condominiums 75%
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